Fed Unanimously Hikes Rates for First Time in Three Years, Hawkish Tone Reignites Dollar Strength...Kosdaq Front-Running Scandal Also Spreads

The KOSPI closed up 0.05% at 6,721 points and the KOSDAQ rose 0.6% to close at 821 points, both posting modest gains. On the currency front, the dollar index topped 100, sending the won-dollar exchange rate rapidly up to 1,379 won—an acceleration from earlier in the session that warrants continued monitoring. On the flow side, foreign investors sold in both the cash and futures markets.

The previous day, the U.S. Federal Reserve delivered its first rate hike in three years and two months and signaled in its dot plot the possibility of one more hike this year, causing Wall Street to reverse lower late in the session. However, news that Saudi Arabia was attempting to restore its east-west crude pipeline was viewed positively, as it kept international oil prices from surging further.

The hosts characterized this rate decision as resolving market uncertainty, while noting that underlying issues remain unresolved, so volatility is likely to persist. They projected that the next phase will be the third-quarter earnings season starting in September and October, and suggested that if corporate earnings growth outpaces the impact of the rate hike, the market can overcome the volatility.

An exclusive report revealed that a manager who ran a Kosdaq active fund at Samsung Active Asset Management is under investigation by the Financial Supervisory Service on suspicion of personally purchasing stocks in advance of the fund's planned holdings. The fund had drawn attention for marketing an aggressive active strategy that did not simply track the Kosdaq index weighting but instead arbitrarily raised the weight of stocks the manager deemed promising, and it gained market attention as a so-called "Samsung pick" after posting strong returns.

The hosts noted that if the allegations are true—that managers used sophisticated methods such as burner phones and tethering to evade IP tracing while front-running—this would be an extremely serious case, tantamount to front-running the entire market after the fund had disclosed its stock-by-stock weightings. Since the fund industry is ultimately built on investor trust, betraying that trust was assessed as a grave incident that undermines confidence in the asset management industry as a whole.

Calls emerged for disclosure of the manager's real name, an official apology and countermeasures from Samsung Asset Management, and a full compliance investigation of all fund managers. Regarding news that the manager in question had already been replaced, the hosts criticized Samsung's explanation—that the move was for asset management efficiency—as an unconvincing account.

There were also calls to pursue institutional mechanisms that would disclose the identity of fund managers involved in similar incidents going forward, to prevent recurrence. Given that the Kosdaq market involves large numbers of retail investors, there was consensus that this incident must not fade away as a mere one-off episode but should lead to genuine institutional reform.

The Federal Reserve unanimously raised its benchmark rate from 3.75% to 4%. Unlike the previous meeting, which saw three dissenting votes, this decision was unanimous, marking the first rate hike in roughly three years. The statement assessed productivity growth as strong and capital investment as solid, while emphasizing that inflation remains elevated; the previous language suggesting inflation could be transitory was removed, signaling a view that price increases are now structural.

The dot plot median was raised from 3.750 in June to 4.125 this time, suggesting the possibility of at least one more rate hike this year. In its updated economic projections, the Fed raised its 2026 growth forecast by 0.1 percentage point to 2.3% and expected unemployment to remain steady, but its PCE inflation forecast was also revised up by 0.1 percentage point from the previous projection, showing that the Fed remains highly sensitive to inflation.

Fed Chair Jerome Powell avoided directly responding to President Trump's pressure for rate cuts during the press conference, but stressed that price stability benefits struggling citizens the most, emphasizing that controlling inflation is important for protecting low-income households. He stated that future monetary policy would be guided by the trend of inflation rather than individual data points, and explained that while this decision does not mark the start of a tightening cycle, it is a response to currently elevated inflation.

Opinions among the hosts diverged. One side argued that, given the upward revisions to both growth and inflation forecasts, the dismissal of recently favorable indicators as transitory, and the door left open for further hikes, the announcement was not the dovish tone the market had hoped for but rather a hawkish stance. The other side took a positive view, noting that compared to Powell's past ambiguous rhetoric that had heightened uncertainty, this communication represented meaningful progress in reducing market uncertainty, and praised him for firmly maintaining his logic of protecting ordinary citizens despite political pressure from President Trump.

Market analysts suggested that since the late-October meeting falls a week before the U.S. midterm elections, the Fed is unlikely to deliver a sensitive message at that time, with expectations weighted toward a pause in October followed by one more hike before year-end. Indeed, the 10-year Treasury yield fell to around 4.9% immediately after the announcement but climbed back to 5.02% following the press conference, suggesting the market's interpretation has not yet fully settled.

The dollar-strengthening effect of the rate hike was also discussed. The dollar index recorded its highest level since July 31 and its largest daily gain since mid-June, breaking above the 100 level. This raised concerns that it could intensify yen weakness in conjunction with the Bank of Japan's rate decision scheduled for the following day; even if Japan raises rates by 0.25 percentage point, if the rate gap with the U.S. remains unchanged, macro variables such as concerns over unwinding of the yen carry trade could resurface.

Saudi Arabia's east-west crude pipeline was shut down after an attack, but according to a Wall Street Journal report, partial restoration is underway; while full restoration could take six to eight weeks, partial operations may resume within days. It was also reported that the U.S. plans to hold talks with Gulf leaders at next Tuesday's United Nations General Assembly in New York.

This news prevented a further surge in international oil prices, but since the situation has not been fully resolved, a clear decline also remains unlikely. WTI crude edged lower, trading in the $102 range.

Today's Noon Salon featured Roh Geun-chang, CEO of Semicon Research Lab, who spent 28 years analyzing the semiconductor industry as an analyst, served 13 years as a research center head, and recently went independent to found his own firm. Regarding recent remarks by Anthropic CEO Dario Amodei and others warning of AI's risks, Roh interpreted them—coming ahead of an IPO—as serving two purposes: raising the company's valuation multiple by conveying the message that AI is capable enough to replace human labor, while also raising entry barriers by emphasizing compliance and safety, which increases the cost burden on later-stage startups founded by people from OpenAI, Anthropic, and Google.

Roh dismissed concerns that this call for a measured pace would lead to reduced AI investment or scaled-back data centers. He explained that while adding security and verification functions to chip design raises costs for both foundries and memory makers, this cost increase ultimately translates into price premiums, becoming a factor that improves semiconductor companies' profitability. He cited TSMC's stock, which barely declined even amid this week's market correction, as an example. He also noted that consensus estimates for next-quarter operating profit at Samsung Electronics and SK Hynix keep being revised upward, with Samsung Electronics projected to exceed roughly 14 trillion won and SK Hynix to reach approximately 7-8 trillion won.

He noted it is industry consensus that U.S. data center power demand will triple from the current roughly 40GW to 120GW by 2030, and that according to TrendForce, the HBM market is projected to roughly double from about $60 billion this year to $120 billion next year, and reach $560 billion by 2030. Google's external TPU sales volume is expected to reach 4.5 million units by 2028, versus 12 million units for Nvidia over the same period, and Google is reportedly set to become the world's first to adopt HBM4E next year. Given this volume expansion and improving HBM4 mix, he projected that despite concerns over won strength, both Samsung Electronics and SK Hynix will see revenue exceed market consensus, with operating profit also likely to come in better than the lower end of current worst-case expectations.

He explained that SK Hynix's HBM market share could decline from about 59% this year to around 52% as Samsung Electronics catches up, but since the HBM market itself is expanding, SK Hynix's HBM revenue itself will actually increase. Regarding Samsung Foundry, he pointed out that it has yet to secure major customers in the data center and AI accelerator segment as a weakness, contrasting this with TSMC, where data centers account for over 60% of revenue. However, he added that since Samsung Electronics and TSMC are the only companies with EUV equipment, its competitiveness in fine process technology remains valid, and it needs to gradually expand its presence by securing customers such as Tesla in the automotive sector.

On reports of a potential joint production review between SK Hynix and Intel in the U.S., he assessed that since Intel continues to post losses in advanced foundry and faces a shortage of products to allocate to facilities like its Arizona plant—as more customers in the AI PC and server CPU markets shift to their own ARM chips—discussions of a joint venture to utilize the site are plausible. However, he noted that concerns over memory technology leakage mean a cautious approach is needed. Finally, on semiconductor sector valuations, he said it is rare for a sector to satisfy all three conditions of industry growth potential, undervalued valuation, and high dividend yield simultaneously, projecting that if Samsung Electronics' annual dividend of roughly 14,000 won is realized, its dividend yield could reach 6%. He noted that as recent rate hikes have widened valuation discounts for U.S. hardware companies, Korean semiconductor stocks have also entered a relatively more undervalued phase.